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Sigature Loans vs Payday Loans
#1
The main difference between signature loads and payday loans are the interest rates that are associated with the loan and the payment terms. A signature loan which can also be referred as a "good faith loan" is a personal loan in which  you can obtain from any finance company or even a bank. It simply requires the borrowers signature and promise to pay collateral. The benefits of this type of loan is it is a lower risk and most lenders will grant this type of loan with little to no collateral.

A payday loan is a type of loan you can get from most finance companies and the requirement is you pay the loan back on your next payday. This type of loan only lasts until your next paycheck. The benefits of a payday loan is you can borrow smaller amounts and they usually do not require a credit report.

What experiences have you had with each of these type of loans? In your own opinion, which loan do you find more beneficial?
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#2
Both loans can be beneficial if they meet your needs. As to what loan is more beneficial, that more or less with varies with the individual and his or her financial requirements. Both types of loans are non-collateral loan.

Signature loans are generally payable for longer periods and carry lower interest rates than payday loans. They take longer to process and approval is dependent, to a large extent, on the individual's credit scores. Payday loans are high interest loans that are due immediately, usually after two weeks or on the next payday. They are easier to obtain and are available to people with zero credit history and low credit scores.

In many cases, payday loans are resorted to when a person has no access to standard terms of installment loans or have exhausted his/her credit limit. They are often used by people who need small, quick cash during financial emergencies.

In my case, I never had to resort to payday loans so they are not beneficial to me. I have access to standard credit terms offered by banks and I have used this facility once to obtain a two-year loan that carries a very low interest rate. I used the funds to buy a used utility vehicle which was put up for sale by a relative. I have since paid the loan out of the vehicle's earnings and I am now reaping the profits out of the business.
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#3
(01-09-2018, 11:40 PM)Camilla Wrote: Both loans can be beneficial if they meet your needs. As to what loan is more beneficial, that more or less with varies with the individual and his or her financial requirements. Both types of loans are non-collateral loan.

Signature loans are generally payable for longer periods and carry lower interest rates than payday loans. They take longer to process and approval is dependent, to a large extent, on the individual's credit scores. Payday loans are high interest loans that are due immediately, usually after two weeks or on the next payday. They are easier to obtain and are available to people with zero credit history and low credit scores.

In many cases, payday loans are resorted to when a person has no access to standard terms of installment loans or have exhausted his/her credit limit. They are often used by people who need small, quick cash during financial emergencies.

In my case, I never had to resort to payday loans so they are not beneficial to me. I have access to standard credit terms offered by banks and I have used this facility once to obtain a two-year loan that carries a very low interest rate. I used the funds to buy a used utility vehicle which was put up for sale by a relative. I have since paid the loan out of the vehicle's earnings and I am now reaping the profits out of the business.
Very good insights. That is amazing that the loan helped you with your business that you are now profiting from. Personally I have never resorted to a payday loan as well. I have always had a decent savings when I was in need of money. The only time I have needed a loan was to purchase a used vehicle last year and I will have it paid off by spring of this year.
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#4
It depends on your needs, but I prefer signature loans than payday loans, it's hard to explain why I choose signature loans sorry I keep it private.

Will for me I prefer signature loans.
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#5
Huh, I didn't know that was generally what a signature loan was. Though what would typically be used as collateral for something like that? How big or small can the loans be? 500 dollar loan equals "We'll hold your car as collateral"? Obviously probably not too believable but for a 5,000 dollar loan or something, yeah. Of course they would hold something as collateral, your signature means nothing to the lender, lol. They should just be called "Collateral loans" IMO.
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#6
Both are unsecured loans, both have high-interest rates (because they are unsecured), although payday loan is much higher

Payday loan is one payment, Signature loans is a series of payments
Payday loan is paid on next pay date, Signature loans paid once a month
Payday loan is usually less than $1,000, Signature loans vary but can be much more, I have seen $5,000
Payday loan lasts one month or less, Signature loans can last a few years
Payday loan is from a non-bank lender, Signature loans are offered by your bank or credit union
Payday loan does not affect your credit, Signature loans do
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#7
It is good to know the differences between these loans personally I think people should take Payday loans out of their options, but I know not everyone feels that way.
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#8
Michael has summarized the differences between the two types of loans very informatively. If say, I were to borrow $1000 in America, I would choose to use a signature loan. It will simply give me more time to organize my activities so that I can pay it off. And the interest rate will be somewhat lower than that of a payday loan. I wouldn't be worried about my credit score being hurt, because I wouldn't have taken out this loan in the first place, if I had known I wouldn't be able to repay it. Even if I become unemployed and can't find another job, I will borrow money from relatives or friends to take care of the loan.
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#9
I agree with @chikatilo, in that I'd rather use a signature loan than a payday loan. I'm not in a desperate situation however, so I would only use a loan either to invest in something, like starting a business, or as an extra money to buy something. However, signature loans require a certain credit score and thus can't be used by everyone.
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#10
My family friend have his signature loan where the amount of deposit he has on that bank is equal to the amount of his loan. Funny isn't? But this person is rich anyway... maybe that's the same reason it was easier for them to have it their way. He told me that the interest was nothing compared to the profit he is earning from it. I don't like the idea of high interest in a payday loan so as much as possible I will stick to much wiser alternatives like signature loan.
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